North America will uphold its lead in music spending, with subscription models predicted to constitute over 60% of global consumer revenues by 2027 according to consultancy firm Omdia. The surge in paid subscriptions, notably from services like Spotify, has been instrumental in rejuvenating the music industry, compensating for revenue losses to online piracy in the lates 1990s and early 2000s. Omdia analysts anticipate that subscriptions will contribute over 62% to the global recorded music revenue by 2027, witnessing a rise from 58% in 2022. Physical formats, such as CDs and vinyl albums, are expected to decline to 13% of revenue by 2027, down from nearly 17% in 2022.
Despite the global expansion of streaming services, Omdia predicts North America will persist as the primary hub for music spending, accounting for 43.2% of global recorded music purchases in 2027, slightly down from 43.9% in 2022. Europe is expected to maintain its second position, representing 27% of global music spending.
While streaming services have reached numerous countries worldwide, Omdia acknowledges the challenge of sustaining momentum in subscriber growth.
“The days of high double-digit growth are long gone”, Omdia warns. “Developed countries all face the problem of what to do when the subscriber pool dries up”.
The anticipated slowdown in subscriber acquisition signals a shift in focus for the music industry, requiring innovative strategies to overcome the plateau. Omdia emphasizes the necessity for streaming companies to strike a balance with pricing, considering the challenge of subscriber pool saturation.
The initial financial outcomes indicate that Spotify wields considerable pricing influence. In the quarter following the price hike, the company not only exceeded its forecast by signing up 6 million new subscribers (compared to the projected 4 million) but also achieved a profit, marking the first time in over a year. Daniel Ek, the Chief Executive and co-founder, emphasized that these results affirm Spotify’s potential as a “great business.” Ek expressed confidence in the product and the continually growing content repertoire, justifying the decision to increase prices during an earnings call with investors.
“Because of our confidence in our product and our ever-expanding content offering, we felt the timing was right to raise prices”, Ek, the 40-year-old music streaming billionaire said.
Omdia recommends that differentiation through exclusive content, similar to approaches taken by video platforms like Netflix, will be crucial for sustaining growth in the next phase of music streaming. Omdia also suggests that streaming companies may need to explore diverse pricing and subscription options to cater to a broader audience and reduce churn.
